CoVaR

Tobias Adrian, Markus K. Brunnermeier

Research output: Contribution to journalArticle

397 Scopus citations

Abstract

We propose a measure of systemic risk, Δ CoVaR, defined as the change in the value at risk of the financial system conditional on an institution being under distress relative to its median state. Our estimates show that characteristics such as leverage, size, maturity mismatch, and asset price booms significantly predict Δ CoVaR. We also provide out-of-sample forecasts of a countercyclical, forwardlooking measure of systemic risk, and show that the 2006:IV value of this measure would have predicted more than one-third of realized Δ CoVaR during the 2007-2009 financial crisis.

Original languageEnglish (US)
Pages (from-to)1705-1741
Number of pages37
JournalAmerican Economic Review
Volume106
Issue number7
DOIs
StatePublished - Jul 2016

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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